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Life Health > Health Insurance

Benefits Council Asks For Flexible HSA Rules

By Allison Bell

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NU Online News Service, Feb. 24, 2004, 5:44 p.m. EST – A key employer group has asked the Internal Revenue Service to take a fast, flexible approach to regulating the new health savings accounts.[@@]

The American Benefits Council, Washington, has responded to an IRS request for comments about HSA regulation by emphasizing the need for some give in the early HSA rules.

Employers also need quick answers to some key questions, James Klein, the council’s president, writes in the comment letter.

“Many large employers need 6 months or more lead time to implement a new benefit option,” Klein writes. “Accordingly, we were encouraged to learn that Treasury anticipates issuing guidance on certain issues as early as next month.”

President Bush brought HSAs to life Dec. 8, 2003, when he signed the Medicare Prescription Drug, Improvement and Modernization Act of 2003.

MPDIMA makes HSAs available to employers that buy high-deductible health coverage. Eligible taxpayers can deduct HSA contributions from taxable income and spend HSA cash on qualified expenses without paying income taxes on the distributions.

HSA-compatible plans can provide no-deductible, “first dollar” coverage for immunizations and other forms of preventive care.

AAHP-HIAA, Washington, a health insurance trade group, says at least 63 of its members are either developing HSA products or thinking about developing HSA products.

But insurers that are trying to market HSA fund management services and HSA-compatible insurance policies have to include disclaimers emphasizing that the government has not put out all of the rules and regulations necessary to run a big HSA in the real world.

Klein says the benefits council’s member employers have 3 top HSA concerns:

- How HSAs will coordinate with flexible spending accounts and health reimbursement arrangements.

- How the IRS will apply benefit plan nondiscrimination rules to HSAs.

- How broadly the IRS will define “preventive care”; how much discretion the IRS will give employers that want to offer prescription drug benefits and other benefits without a high deductible; and how the IRS will treat employers that want to offer high-deductible health plans as options under existing medical plans.

In the long run, employers want to see the IRS deal with possible conflicts with state law, Form 1099 reporting requirements for plans that use debit-card-based administration systems, and the relationship between the HSA law and the regulations that govern cafeteria plans, Klein writes.

Klein says employers also want the IRS to let early retirees use HSA funds to buy health insurance, let workers over age 65 continue to contribute to HSAs, and state that employers can set rules to keep employees from switching between HSA plans and other plans to avoid large medical expenses.

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